Setting Up a Lease in LeaseAccelerator
Once a lease agreement has been signed, it is time to enter the schedule information into LeaseAccelerator.
Entering the Lease Schedule can be accomplished through the Bulk Import functionality or by entering all the key information through the four (4) Action Tiles – Participants, Details, Terms and Expenses within the Enter Schedule workspace in the user interface.
For further details on each field including definitions, please refer to the Client Implementation Guide (CIG).
Download a PDF version of the guide.
Participants
The Participants tile identifies the participants in the deal. Fields are customized to match internal process roles and responsibilities. The selections for each field show the list of available people, companies, or addresses for each applicable role.
Note: Any field in red text with an asterisk is required to be populated to save a deal.
Participants selected determine the schedule’s proper association for:
Reporting
Accounting
Lease and Asset Management purposes
Details
Use the Details tile to manually enter line items of assets. The Details tile contains the asset details for the schedule. Use the Comments box to capture any details about the deal that you want recorded.
Takedown Against Existing Lease Line
Select this box only if the lease schedule is a sub-ordinate asset lease with previous funding committed on a more “global” perspective. The Lease Line is similar to having a Home Equity Line on your house – you have available funding of a certain amount approved and you are now using a tranche of the overall funding. If the Lease Line checkbox is selected, a new Action Tile is generated, and the user is asked to Select the Lease Line that this specific lease is attached to.
It is also on this tile that you have the ability to attach a PDF or scanned image of the lease schedule by clicking Choose File and saving a file to the papering deal.
Input Asset Details by clicking the plus sign. A pop-up will appear where you can enter further details about the assets on the schedule.
Please note the required fields in Red with an asterisk. Product Category is necessary for accounting classification as it determines the Economic Life used in the classification analysis. GL Code is critical as it maps to the set of natural account numbers used to create journal entries for an asset. Quantity and Unit Price drive a total cost for the schedule which is also used for lease classification.
If entering a utility-based lease, check the box “Lease terms are based on utilization”. Specific fields will appear and should be populated accordingly. Note: LeaseAccelerator currently supports Utilization based payment terms for Real Estate only. This includes all Real Estate categories and sub-categories configured in the system.
Terms
The Terms tile contains the schedule terms. You specify:
Payment amount, frequency, and timing
Lease type
Any mid or end-of-term options
Payment Based On Field
When entering the Payment Based On field, choose from four options:
Fixed Interest Rate
Floating Interest Rate
Lease Rate Factor
Cost Basis Not Available
Option Selected |
These Fields Appear |
|---|---|
Fixed Interest Rate |
|
Floating Interest Rate |
|
Lease Rate Factor |
|
Cost Basis Not Available |
|
Defaults
In the Terms tile, if the information has not been transferred from an upstream document (for example, an awarded proposal), LeaseAccelerator populates all required fields with standard terms according to any defaults associated with the selected participants. Update these fields with terms relevant to the deal being entered. The table below provides details about the fields on this tile.
Field |
Description |
|---|---|
Lease Type |
Typical options for lease type include: Finance Lease - $1PO/Mandatory Purchase *selecting this lease type will impact accounting classification. Finance Lease – Fixed Purchase Option *selecting this lease type will require a Buyout EOT Option with fixed purchase amount. First Amendment Lease Full Service Lease Leveraged Lease Debt Leveraged Lease Equity Loan/Note & Security Agreement Modified Gross Lease Municipal Lease Purchase Other Financial Product Split TRAC Lease Synthetic Lease TRAC Lease Triple Net Lease True/Operating Lease (FMV) Note: For Full Service, Modified Gross or Triple Net you may have Other Related expenses. Note: For Split TRAC and TRAC you may have Return Fees (or Residual Value Guarantees). |
Periodic Payment Frequency |
Defines how often the Lessee makes payments in a calendar year. Available options include:
|
Advance or Arrears |
Defines when in the payment period a payment will be made.
|
Interim Rent |
Identifies the following:
|
Mid-Term/ EOT Options |
Defines the options offered by the funder for asset disposition at end-of-term and, in some cases, mid-term. |
Blended Lease Rate Factor (LRF)
Lease Rate Factor is a simple multiplier typically provided by a funder or vendor. Your lease payment is calculated by multiplying the lease rate factor times the value of what you are leasing.
When you enter the lease rate factor, the payment amount populates.
To have Blended LRF automatically calculated when entering the Lease Rate Factor, check the Enter LRF by Asset Type box. LeaseAccelerator displays fields for you to enter the lease rate factor for each product category referenced on the Details tile. Once you enter these fields, the blended LRF displays when you tab off or click away from any individual LRF field.
Interim Rent
If you are obligated to pay interim rent, you can specify the manner in which interim rent will be calculated, and whether the interim rent Is a) payable up-front or b) will be rolled into the finance amount.
If you select one of the Interim Rent choices, a second field populates for you to specify the interim rent basis as “payment terms that are same as above” by Index Rate or a Floating Rate.
Terms of Lease
Enter information about the terms of the lease.
Step |
Action |
|---|---|
1 |
Select the Lease Type from the drop-down list. The most common lease type is True/Operating Lease (FMV). The Funder can depreciate the equipment, which means that they can offer a lower rate. |
2 |
Select the Periodic Payment Frequency from the drop-down list. |
3 |
Enter the number of payments in the term of the lease in the Number of Period Payments field. |
Step Payments
While typical leases have a standard, consistent payment schedule, more complex financing structures may require you to enter Step Payments. Common use of step payments includes:
Skip payment or rent holiday
Escalator or step schedules
Balloon payment
Rent abatement periods
When you click the Payment Schedule Calculator button, LeaseAccelerator opens a new window where you can enter the payment information. See the table below for steps to entering step payments:
Step |
Action |
|---|---|
1 |
Select Goal Seek Objective: Back into displayed payment schedule. |
2 |
|
3 |
Enter the first step payment amount. |
4 |
Enter the number of periodic payments at that amount. |
5 |
Enter the ending month for this payment amount. (Example: If first 12 months are at $$.$$, then # of Periodic Payments is 12 and Ending Month is 12.) |
6 |
Hit the plus button to add additional steps. Hit the ‘X’ button to remove steps. |
7 |
You may click Calculate if you would like LeaseAccelerator to calculate the blended LRF. Once done, you may click Use and you will be taken back to the Terms tile. |
8 |
When you have completed all information for all steps, click Submit. |
Mid-Term/End-of-Term Options
Click Mid-Term/End-of-Term Options to enter any mid-term or end-of-term options in accordance with the options and obligations stipulated in the lease. By clicking the plus sign, you may add as many options as necessary. Remember: You should enter ALL options contained in the lease, not just the one that is reasonably certain to be exercised.
The Type field contains the selections for a mid-term option or end-of-term option. The field next to the Type field contains a subset of options that qualify as mid-term or end-of-term.
The available options to choose from for the Types: Early (Mid-Term) and End-of-Term Options are the same, though the options generate different fields based upon the type. For Example:
Selecting Return for an Early (Mid- Term) type generates fields for a month of return and any penalties.
Selecting Return for an End-of-Term type option only generates a field to specify a return fee if any.
The same options appear in the Type drop down of option selections to offer greater flexibility in defining/capturing both mid-term and EOT options.
When capturing EOT terms for a Schedule, you can also capture FMV caps (or floors) by checking the appropriate box and providing the cap or floor amount. If a Renewal or Buyout at FMV is selected and the floor or cap selection is made, LeaseAccelerator allows you to enter a cap amount in the field next to the selected drop down. You can enter this cap amount as a fixed amount or as a percentage of the original amount financed.
It’s also beneficial to point out that when setting up EOT Options in the User Interface, there are two specific selections to define whether an option is automatic or not. In the PIW, however, the process for defining an automatic option is slightly different. Please refer to the Client Implementation Guide for specific details on how to ensure an option is automatic or not automatic for bulk imported leases.
Field |
Description |
|---|---|
Type |
Indicate if you are recording a mid-term or end-of-term option. The option you select generates different fields based on the type. Unless you have a specific mid-term option to record, enter everything as end-of-term. |
FMV Cap |
If you check the Not more than either a Percent or Fixed amount box, the percent or amount entered indicates the maximum amount you will pay. Percent is more flexible and gives you more protection. Hard capped is a fixed amount. |
Evergreen |
Although LeaseAccelerator provides the option to record an Evergreen renewal option, you generally will not need to do so. LeaseAccelerator automatically provides for month-to-month renewal at the current rental amount. However, if the lease contract specifies a different rental amount for month-to-month renewal, you should enter the Evergreen option explicitly to capture the modified payment amount. Please also note that the Default EOT Treatment is based on Product Category and what is configured in the Settings/Asset Types screens. Please refer to the LA User Guide to Configuration and the Client Implementation Guide for further information. |
TRAC leases or split TRAC |
If you are doing a return and creating a TRAC or split-TRAC lease:
|
TRAC leases or split TRAC cont. |
To capture a Contractual GRV using a Return Fee, you must specify in one of two ways:
|
Renewals
The automatic renewal (“evergreening”) process looks first for end-of-term options that are tagged as Automatic before presuming a month-to-month renewal. This allows configuration of such scenarios as an automatic 12-month renewal.
If a renewal occurs at the end of term, it starts in the month following. For example, if a renewal occurs at the end of term for a 36-month lease, the renewal starts at month 37.
You can add as many Mid-Term/End-of-Term Options to a deal as are specified by the schedule. After completing the fields in the window, click Add. LeaseAccelerator displays the option as a line item at the top of the window. You can then add another option or click Submit to return to the main page.
Result
LeaseAccelerator summarizes all the Mid-Term and/or End-of-Term options at the bottom of the Terms tile of the Schedule Entry.
Expenses
This tile enables the user to add ancillary expenditures that are required by the lease agreement or that have a direct impact on the accounting for a lease and are incremental to the base rent. The data required in this tile varies based on the category and subcategory of expense.
Expense Type is a general grouping of expenses such as CAMS, Other Rent, Initial Direct Costs (IDC), Lease Incentives, Deposits, or Late Fees. Expense SubType defines the specific type of expense such as for CAMS – Landscaping, Security; IDC – Commissions or Payments to Prior Tenants; Other Rent – Property Tax, Property Insurance, etc. (See the detail validation values).
It should be noted that Scheduled Related Expenses create actual accounting activities for specific Expense Types and accounting may differ based on the Expense SubType (i.e., ARO/End of Life has different treatment depending on the selection). Other Expense Types entered here are for forecasting/reporting purposes only. Actual accounting is only generated when an Invoiced or Paid amount is entered.
Additionally, Lease Incentives may only be added at lease inception and not once a lease has been booked.
For each expense, click plus sign to add a new expense and populate all the relevant fields. Those in red are Required.
Field |
Description |
|---|---|
Type |
Indicate the type of related expense specified in the contract as the responsibility of the Lessee. Payment may be made to the lessor/landlord or directly to the vendor. |
Expense SubType |
A grouping of expenses within a category by function. Choices vary depending on Type of expense indicated above. |
Payee |
A company providing services related to the leased asset. Often used for providers of IDCs, Lease Incentives, or other real estate expenses such as Insurance. The drop down will be populated with all eligible Vendors which you have loaded during your configuration process. |
Payment Frequency |
Recurring timing of expense. |
First Payment Date |
Date the first payment of expense is due. May not be prior to the lease start date. |
Currency |
Currency associated with the initial payment amount. |
Amount Paid |
First payment amount from which escalation caps are applied. |
Late Fee Interest Rate |
Interest Rate applied to payments to determine Late Fees. |
Escalation Cap (%) |
Maximum amount of increase in related expense each year. |
Based on Benchmark Amount of |
Amount, if any, included in the base rent for the Expense Type/SubType. |
Maximum Payment |
Maximum amount of total expense allowable to be charged. |
Applicable To |
Indicate whether this is applicable to all assets on a schedule or a specific product category only. |
Comments |
Add any relevant comments. |
After each expense has been entered, click the Add button. Once all expenses have been entered, you may hit the Save button located at the bottom of each tile.
Booking the Schedule
After you complete and save the schedule, LeaseAccelerator displays the Deal History workspace, which shows a pending action to book the schedule.
If you do not see a pending action to book the schedule, users may enqueue this ToDo manually by following these steps:
Step |
Action |
|---|---|
1 |
On the Next Steps tile, select Book Deal from the Event Type drop-down. |
2 |
Choose the appropriate Participant Type for the person who will be booking the new deal. |
3 |
If there is a specific person that should be booking the new deal, you may select their name from the Assign To drop-down. This field is not required. |
4 |
Click Save. |
Follow the steps below to book the deal:
Step |
Action |
|---|---|
1 |
Click Book in the Pending Actions. Result: The Book Deal workspace opens. |
2 |
A drop-down lists possible source documents you can use for asset-level booking. Asset management documents (“Asset Manifests”) can be automatically generated by LeaseAccelerator to convert line item-level equipment details into asset-level details. (Asset Manifests carry the terms and information captured during Schedule Entry.) |
3 |
Enter the Commencement Date for the lease. This is the lease start date. See CIG for further details. Under ASC842 and IFRS16, the actual Accounting commencement is based on a combination of this field and the Asset Available for Use Date. |
4 |
Select the appropriate fiscal period from the Ledger Date drop-down, if applicable. Some Commencement Dates will automatically choose appropriate Ledger Date and drop-down will not appear. |
5 |
Select the Ledgers that you want this lease booked to. |
6 |
Select the Expected Disposition or Reasonably Certain EOT Option from the drop-down. |
7 |
Enter the Expected Holding Period (Reasonably Certain) |
8 |
Enter the appropriate IBR at Inception. If you would like to use the Default IBR, which is the Expected IBR based on loaded rates listed above this field, click the Use Default IBR button and this field will auto-populate. |
9 |
Enter the Estimated Guaranteed Residual Value (GRV) |
10 |
Click Book. Result: LeaseAccelerator displays the Deal Summary workspace, which displays the results of booking for you to review. |
Classifying the Deal
After you book the schedule, LeaseAccelerator displays the Deal Summary workspace, which shows new fields on the Participants tile.
Fields in red with an asterisk are required by the system.
Once all necessary fields have been populated and you’ve indicated a Make Changes Effective date, navigate to the Summary tile and click Save at the bottom of that workspace to save your participants.
Also on the Summary tile, you will see a line for Accounting Classification that indicates that the lease has not yet been classified.
Scroll down until you see the Save and Generate Accounting Classification buttons. Select Generate Accounting Classification to be taken to the Accounting Classification Analysis workspace, where there are three sections, as shown below.
Summary of Tests
The first section is the Summary of Tests used to determine the accounting classification.
This section shows the tests run for each Accounting Standard to determine the classification of a lease.
Next is a section that shows the classification by category.
Finally, there is a section that displays the characteristics of the deal.
After reviewing the classification, scroll down and select the Save Account Classification button.